Society’s Cohesion, Fairness, and the Cuts

by Adnan Al-Daini / August 23rd, 2011

People could accept hardship and cuts if they perceived that the load was being shared fairly and justly, with those most able shouldering a heavier load. David Cameron, Britain’s Prime Minister, a month after taking office (June 2010), made his “we are all in this together” speech in which he said:

I want to make sure we go about the urgent task of cutting our deficit in a way that is open, responsible and fair. I want this government to carry out Britain’s unavoidable deficit reduction plan in a way that strengthens and unites the country. I have said before that as we deal with the debt crisis we must take the whole country with us – and I mean it. George Osborne has said that our plans to cut the deficit must be based on the belief that we are all in this together – and he means it…But this government will not cut this deficit in a way that hurts those we most need to help, that divides the country or that undermines the spirit and ethos of our public services. Freedom, fairness, responsibility: those are the values that drive this government, and they are the values that will drive our efforts to deal with our debts and turn this economy around.

Who could possibly disagree with that? The problem is that the actions of this government do not quite mesh with the rhetoric. Many of the working poor and vulnerable are suffering extreme hardship, while the lives of the super-rich, on the other hand, are hardly affected; in fact, if anything their wealth has been increasing.

The use of food banks by desperate families is on the rise in this country, according to a charity that runs them nationwide. Mr. Chris Mould, chief executive of the Trussell Trust, explained on Radio 4’s Today programme, August 20, 2011, that there are 13 million people in Britain already living below the poverty line and increases in energy prices, cuts in working hours and wage rises not keeping up with inflation have pushed families to the edge, with a dramatic increase in those having to rely on food banks, with food donated by the public, to survive. How can this be acceptable in a rich country like Britain?

I do not know how many of these families are paying income tax, but any family relying on food banks to survive should not be paying income tax. It is not fair or just. Here is a suggestion from a non-economist to reform the tax system: progressive taxation on income should be introduced at the lower and the upper end of income. Introduce a 60% tax rate on any income above that of the Prime Minister, for example. Reintroduce the 10% tax band abolished by Labour, or even increase personal allowances to take the very poor out of tax altogether. The principle of making the rich take a bigger share of the burden is essential for community cohesion and for the unity of our people. I know Boris Johnson is advocating abolishing the 50% tax band on income above £150,000, introduced in 2010, saying:

As far as I understand it [the 50p rate of tax] is not really raking in huge sums at all, and if that is the case then I think we should think about what the real benefit of this tax is.

Mr. Johnson is missing the point. The symbolism of cutting taxes for the rich while people at the bottom are having to choose between “eating or heating” will deliver a fatal blow to the government slogan of “we are all in this together.”

Working harder to close tax and accounting loop holes that largely benefit rich taxpayers and companies could net the treasury as much $20 billion . Introducing a Tobin (Robin Hood) tax levied on financial transactions is supported by 350 leading economists that include Jeffrey Sachs and the Nobel laureate Joseph Stiglitz, in addition to 66% of the British public. It is estimated that this will raise up to $400 billion a year in revenue across Europe that can be used to help the very poor and vulnerable. These are the sort of measures that would give the slogan “we are all in this together” some credibility. Will the government do any of the above?

Enlightened altruism has prompted Warren Buffett , the legendary American investor and one of the richest people in the world with a personal fortune estimated at $50 billion, to advocate that the rich should contribute more to repair the US finances. He reckons that he is taxed at a lower percentage rate than any of the 20 other people who work in his office. Thank God that in Britain, or the rest of Europe for that matter, we do not have such an immoral and frankly bizarre form of taxation. But the principle of the rich paying more is only fair, and I hope many of the enlightened rich will see it as essential for the health of society

Compartmentalizing actions and policies, leaving it to the treasury to deal with Britain’s deficit and debt is not a sensible way to proceed. The Prime Minister and the Cabinet collectively must look at policies holistically, and subject them to a societal impact assessment to see their effects on society as a whole.

Mr. Cameron, it is difficult to reconcile your words in your June 2010 speech with the actions of this government. People are hurting and if you meant what you said, then your government actions must match the words. I, somehow, believe this is not going to happen, and the danger you warned us about, cutting the deficit “in a way that hurts those we most need to help, that divides the country or that undermines the spirit and ethos of our public services.” is becoming more probable, if it is not already upon us.

Adnan Al-Daini (PhD, Birmingham University, UK) is a retired University Engineering lecturer. He is a British citizen born in Iraq. He writes regularly on issues of social justice and the Middle East. Read other articles by Adnan.